Fixed Operations account for about 12% of the total dealership sales; however, it produces 60% of the overall net profit.  Warranty claims equate to 30% of the total volume in the service department...with that understanding, one will deduce that the warranty department in your dealership accounts for 20% of the total net profit of the dealership!  When you have a single department that only represents 4% of your total sales but 20% of the total net profit, you will find that very small fluctuations in your warranty department will have HUGE impacts on your bottom line.

Think about this number:  97%...is that number significant?  You bet it is.  If you are running 97% warranty expense vs. your peer comparison then you are a superstar in the eyes of the manufacturer!  Here is the problem with that number - if you are submitting for $100,000 per month in warranty claims then you are losing $3,000 every single month, because you should be at 100% MINIMUM! (by the way, that equals $36,000 a year for those keeping count.) 

I mentioned "automated write off's" in my last blog post.  If you remember, that potential amount of lost revenue came to $60,000 per year.  So we are up to $96,000 a year of lost revenue in your warranty department alone...revenue that could very easily be profit instead of loss.  Remember, we are not even addressing write off's or audited repair orders...these are dollars that are in your control - all the while you are still considered a "superstar" in the eyes of the manufacturer...the manufacturer that has kept $100,000 of YOUR MONEY, to which you are entitled.